The kids’ apparel brand Rockets of Awesome is laying off about half of its staff and is shuttering its New York store, according to new reporting from The Wall Street Journal.
Rachel Blumenthal founded Rockets of Awesome in 2016 as a quarterly subscription service that would deliver boxes of trendy clothes that were designed in-house. The brand was one of several similar subscription services that also include Kidbox and Stitchfix Kids. Last year, when Rockets of Awesome nabbed $12.5 million in funding from Foot Locker’s investment arm, Blumenthal told me that her goal was to become a multichannel brand that would sell clothes in its own stores and through retailers, including Foot Locker’s stores and website. “The goal is to be available to parents in whatever way they prefer to shop,” she told me last year.
But just a year later, Rockets of Awesome is struggling, and the startup is far from alone. A spate of well-funded, direct-to-consumer brands have had difficulty balancing profitability with the need to acquire customers and achieve brand awareness through marketing. Companies that land millions in capital must respond to intense investor pressures, and many direct-to-consumer startups have found themselves in choppy waters this year. And it’s only March.
Perhaps the most dramatic example of this is Brandless, a direct-to-consumer alternative to Amazon that sold a range of household products. Brandless launched in 2017, and just a year later, it announced it had received a $240 million investment from SoftBank’s Vision Fund. But in February of this year, Brandless abruptly shut down. Around the same time, direct-to-consumer mattress startup Casper Sleep—once hailed as a unicorn—had a disappointing IPO. This was partly because Casper acknowledged it had lost $67 million on $312 million in revenue in the first nine months of 2019. Then last week, BuzzFeed reported that Outdoor Voices had been losing millions of dollars annually and was currently “hemorrhaging” $2 million a month. This spurred the board to force the brand’s founder, Ty Haney, to step down from her position as CEO; a few days later, Haney resigned from the company altogether.
Many analysts believe we’re just at the beginning of a reckoning among direct-to-consumer brands. When we reached out to Blumenthal for comment, she referred us back to what she said in the Journal. “The world is shifting,” Blumenthal told reporter Charity Scott. “We’re proactively responding to the pressures in the market.”